BMG Rights Mgmt. (U.S.) v. Altice U.S., Inc.
| Decision Date | 12 May 2023 |
| Docket Number | CIVIL 2:22-CV-00471-JRG |
| Parties | BMG RIGHTS MANAGEMENT (US) LLC, UMG RECORDINGS, INC., CAPITOL RECORDS, LLC, CONCORD MUSIC GROUP, INC. and CONCORD BICYCLE ASSETS, LLC, Plaintiffs, v. ALTICE USA, INC., and CSC HOLDINGS, LLC, Defendants. |
| Court | U.S. District Court — Eastern District of Texas |
Before the Court is Defendants Altice USA, Inc. and CSC Holdings LLC's (collectively, “Altice”) Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) (the “Motion”). (Dkt. No. 22). In the Motion Altice requests that the Court dismiss Plaintiffs BMG Rights Management (US) LLC, UMG Recordings, Inc., Capitol Records LLC, Concord Music Group, Inc. and Concord Bicycle Assets LLC's (collectively, “Plaintiffs”) Complaint in its entirety. (Id. at 1.) Having considered the Motion, the subsequent briefing, and for the reasons set forth herein, the Court finds that the Motion should be DENIED.
On December 14, 2022, Plaintiffs filed their Complaint against Altice, asserting both vicarious liability for copyright infringement and contributory copyright infringement. (Dkt. No. 1, ¶¶ 16, 18.) Plaintiffs own or hold exclusive copyright interests in extensive catalogs of musical compositions and sound recordings. (Id., ¶ 7.) Altice is a large internet service provider (“ISP”), servicing millions of subscribers within the United States. (Id., ¶ 8.) Plaintiffs allege that “Altice's services have been used to commit internet piracy in staggering volumes.” (Dkt. No. 23 at 9, citing Dkt. No. 1, ¶¶ 38-39.) On February 17, 2023, Altice filed this Motion to dismiss both the vicarious liability and contributory copyright infringement claims, contending that Plaintiffs' complaint fails to plausibly allege either claim. (Dkt. No. 22 at 2-3.)
Under the Federal Rules of Civil Procedure, a complaint must include “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A Court can dismiss a complaint that fails to meet this standard. Fed.R.Civ.P. 12(b)(6). To survive dismissal at the pleading stage, a complaint must state enough facts such that the claim to relief is plausible on its face. Thompson v. City of Waco, 764 F.3d 500, 502 (5th Cir. 2014) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when the plaintiff pleads enough facts to allow the Court to draw a reasonable inference that the defendant is liable for the misconduct alleged. Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The Court accepts well-pleaded facts as true and views all facts in the light most favorable to the plaintiff, but is not required to accept the plaintiff's legal conclusions as true. Id. “[A] complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations.” Twombly, 550 U.S. at 555.
In the Fifth Circuit, motions to dismiss under Rule 12(b)(6) are viewed with disfavor and are rarely granted. Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009); Lowrey v. Texas A&M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997). “The court may consider ‘the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint.'” Script Sec. Sols. L.L.C. v. Amazon.com, Inc., 170 F.Supp.3d 928, 935 (E.D. Tex. 2016) (quoting Lone Star Fund V (U.S.) L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010)).
In its Motion, Altice contends that Plaintiffs failed to meet their burden to plausibly allege the secondary liability copyright infringement theories of vicarious liability and contributory infringement. (Dkt. No. 22 at 2-3.) Altice contends that Plaintiffs failed to meet their burden to plead with respect to both required elements of the vicarious liability claim-that Altice has a direct financial interest in the underlying infringement, and that Altice had the right to supervise and control the infringing activity. (Id. at 6-7.) Further, Altice contends that Plaintiffs failed to adequately allege that Altice acted with culpable intent, which Altice maintains is a required element of contributory infringement. (Id. at 21.) The Court disagrees. As explained below, the Plaintiffs' complaint is more than sufficient to put Altice on notice of the claims at issue.
Altice asserts that Plaintiffs have not plausibly stated a claim for vicarious liability because Altice has no direct financial interest in the exploitation of infringing materials, nor does it have the power or ability to police the internet or its subscribers' activity such that it may stop infringement. (Dkt. No. 22 at 7.) The Court finds that Plaintiffs plausibly alleged both elements of the vicarious liability claim.
Altice argues that Plaintiffs' allegation that Altice has a direct financial interest in ongoing subscription fees from alleged direct infringers is insufficient to constitute a direct financial interest. It contends that Plaintiffs cannot show that Altice earned profits “distinctly attributable” to the infringing activity. (Id. at 7-8, citing Bell v. Llano Indep. Sch. Dist., 2020 WL 5370591, at *5 (W.D. Tex. Feb. 13, 2020).) Altice receives the same flat fees regardless of whether its subscribers use its services to infringe or for legitimate activities. Thus, it argues, the requisite causal relationship between the infringing activity and any financial benefit it reaps cannot be shown as any benefit it receives is not tied to the infringing activity itself. (Id.; see also Dkt. No. 24 at 2.)
Where a defendant does not earn revenue tied to a particular use of its services, the causation requirement can only be satisfied where the infringing activity draws subscribers to the service. (Id. at 2, citing Ellison v. Robertson, 357 F.3d 1072, 1079 (9th Cir. 2004).) Altice contends that the availability of infringing content must be the main customer draw to its services, and that the Plaintiffs failed to plead facts that would plausibly support such a conclusion. (Id. at 11, citing Sony Discos, Inc. v. E.J.C. Fam. P'Ship, 2010 WL 1270342, at *4 (S.D. Tex. Mar. 31, 2010).) It asserts that Plaintiffs do not and cannot allege that anyone would have declined Altice's services or paid less in subscription fees absent any ability to infringe via Altice's network. (Id. at 9.)
Altice argues that Plaintiffs' allegation that “[t]he ability to download music and other copyrighted content...is a significant incentive for customers to subscribe” (Dkt. No. 1, ¶ 32) is inadequate under Twombly/Iqbal. (Dkt. No. 22 at 9.) Altice relies heavily on UMG Recordings, Inc. v. Bright House Networks, LLC, where a district court in Florida granted an ISP's motion to dismiss the plaintiffs' vicarious liability claim, noting that there, plaintiffs failed to allege that there was anything unique about the service which the ISP offered, where it was alleged only that the ISP “offer[ed] a conduit to the World Wide Web.” (Id. at 10, citing 2020 WL 3957675, at *5 (M.D. Fl. July 8, 2020) (slip copy).) Altice asserts that the same is true here.
Altice maintains that, at most, Plaintiffs' allegations suggest the ability to infringe is “just an added benefit” of subscribing to Altice's services for a very small subset of people, rather than the requisite main draw to the service. (Id. at 11, citing Ellison, 357 F.3d at 1079.) Essentially, Altice puts forth a “slippery slope” argument, contending that the imposition of liability here would read “direct” out of the “direct financial benefit” requirement, thereby creating liability risk for every ISP. (See id. at 10-11, citing UMG Recordings, Inc. v. Grande Commc'ns Networks, LLC, 2018 WL 1096871, at *10 (W.D. Tex. Feb. 28, 2018) adopted by 2018 WL 2182282 (W.D. Tex. Mar. 26, 2018); Bright House, 2020 WL 3957675, at *4.)
The Motion next addresses two additional arguments by Plaintiffs that Altice receives a direct financial benefit from the infringing activity. First, the complaint alleges that Altice's advertising and marketing of its high-speed internet services served as a draw for prospective infringing subscribers. Altice contends this fails to establish direct financial benefit because Plaintiffs do not actually say that subscribers chose these subscriptions because of an enhanced ability to infringe. (Id. at 11-12, citing Dkt. No. 1, ¶¶ 15, 32, 37.) Second, the complaint also asserts that Altice's failure to police infringing subscribers purposefully attracted such subscribers. Altice says this similarly fails. (Id. at 12-13.) It insists this theory would require a “lengthy chain of inferences” to achieve plausibility-that Altice loosely policed its network, that subscribers knew about the lack of policing, and then chose Altice because of it. (Id. at 13.)
Altice generally complains of a lack of specificity in the complaint. (See id. at 14-15.) It argues that Plaintiffs failed to allege that any of the infringing subscribers using Altice's services did so to infringe Plaintiffs' works in particular or that the drawn subscribers were the ones who actually infringed. (Id.) In sum, Altice argues that Plaintiffs failed to allege that subscribers actually chose its internet services over others because of an enhanced ability to infringe, and that Plaintiffs' allegations fail to meet the pleading standard as a result. (See id. at 12, 16.)
Plaintiffs respond that they have met their burden at the pleading stage-they have alleged that Altice gained subscribers due to the ease of infringement using Altice and that Altice...
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